11/01 – Dollar not giving up without a fight

Jeremy Thomson-Cook
Jeremy Thomson-Cook 11 January 2021

GBP: Pushing higher versus the euro

EUR: Steady as she goes

USD: Strong jobs report could scare the bears


Sterling is a bit of a mixed bag this morning, higher against commodity and EM currencies but lower against the safe havens with falls on equity markets opening the week on a downbeat note as investors continue to doubt the Fed’s willingness to keep interest rates as low as they are until 2024.

While we focus on rates, one of the Bank of England’s prime proponents of the negative interest rates will speak at 1pm this afternoon and may give further weight to the argument that what is needed is a spurt of further monetary policy help to supercharge the recovery from the pandemic.

Elsewhere sterling risk is still very much a beast with two heads; Covid-19 and Brexit aftermath. With Professor Whitty warning on tv this morning that the next three weeks will be the worst so far of the pandemic and numerous stories of businesses struggling with supply chains, regulation and taxes, the scene is set for additional sterling negativity in the coming month or so.


With the strength of the USD and the wider pull lower in risk, it is no surprise to see the single currency also lower this morning. The ECB’s first meeting of 2021 is a week on Thursday and will likely set the tone for the single currency for the first few months of this year but we can imagine already that policymakers are happy that EURUSD is no longer butting up against the 1.25 level.

US dollar

There is no currency as important as the US dollar and its moves in recent days have reminded all of that fact. Higher yields on US debt, pushed there by a market expecting a Federal Reserve rate rise sooner than had previously been anticipated, are driving the desire for USD with those in the market who entered the year short the dollar, looking for a shelter from the storm.

Fed members due to speak this week will have to give markets more forward guidance as to whether these recent moves on higher fiscal spending and inflation increases are warranted or not. For now, we are not worried about this move higher by the USD and continue to forecast its weakening across the board through 2021.

The news that Democratic leaders in Washington will begin a 2nd round of impeachment proceedings against President Trump will have little effect on markets – absent further civil disobedience – but ensure that the spotlight remains on Washington DC into the Biden Inauguration next Wednesday.


In a market of falling equities and a rising dollar it is no surprise that commodity currencies are lower this morning despite the run higher in oil prices that has started the year. We remain optimistic that our call for a lower AUD made last week, is just starting to be realised more widely.

Have a great day.